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Mass. treasurer wants second role for pension chief

Michael Trotsky had run a hedge fund.

Michael Trotsky had run a hedge fund.

The $50 billion Massachusetts state pension fund has been missing a key player since June — a permanent chief investment officer.

The fund’s executive director, Michael Trotsky, has been filling in. And he has the experience to do it; his last job was at a hedge fund managing money. On Tuesday, state Treasurer Steven Grossman, the chairman of the pension fund board, indicated that he likes the current arrangement and proposed that Trotsky keep both jobs.

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Grossman said the move would solve the Pension Reserves Investment Management’s pressing hiring problems, and “bring immediate stability to the organization.” By naming Trotsky to the post, the pension fund will more easily attract talent to fill its other empty positions, Grossman said, including people to oversee its private equity and hedge fund managers.

The move also would save the pension board about $200,000 under Grossman’s plan, because Trotsky would agree to do both jobs for just a $50,000 raise over his current job, or $295,000, plus bonus.

The board’s investment committee voted to recommend that Trotsky keep both jobs, and the full board will consider the proposal at its October meeting. But several members on Tuesday expressed concern that it could be risky to require so much of one person, and potentially to create a greater work load for other staffers.

Committee member C. LaRoy Brantley of consulting firm Cambridge Associates said of Trotsky, “I can’t think of anyone who’s more uniquely qualified” to handle both jobs. But, he said, there was good reason to keep the two positions separate, and urged patience on the part of the board in thinking the matter through.

Greg A. Mennis, a Governor Deval Patrick appointee on the pension board, expressed concerns and abstained from Tuesday’s vote.

Trotsky said he has thought hard about taking the combined jobs because, “I wouldn’t want to bite off more than I can chew.”

While the staff of 25 has been working extra hard, he said, he plans to accelerate hiring and continue to offload certain administrative responsibilities to deputies. “I feel very confident that we can handle it,’’ Trotsky said.

It is not unheard of for pension systems to have an executive director who also runs investments.

Florida and Ohio have similar setups, according to Massachusetts pension staff.

Trotsky joined the pension board just over two years ago, charged with improving performance after a dismal showing during the financial crisis.

For the fiscal year ended in June, the fund was roughly flat, while the Standard & Poor’s 500 index was up 5.5 percent.

Like most funds of its size, the state’s portfolio is a mix of stocks, bonds, and alternatives like private equity, timber, and hedge funds.

In calendar year 2012, the fund has gained about 8 percent through August, staffers said. The S&P 500 rose 13.5 percent in that time.

The state pension fund has outperformed its benchmark in each of the past 10 years, staff said, except in fiscal 2009. In fiscal 2011, Trotsky’s first year on the job, the fund returned 22.3 percent, versus a 21.7 percent internal benchmark. Annually, the fund is looking to beat a return of about 8 percent.

Trotsky also has overseen a period of heavy turnover at the fund, most notably with the departure in June of Stanley P. Mavromates Jr., the longtime investment chief. The fund also lost its operating chief. The pension fund has historically had difficulty retaining talent in some positions because people can earn far more in the private sector in Boston.

Beth Healy can be reached at bhealy@globe.com.
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